WHO COMMITS INSURANCE FRAUD?
IFPA-FUNDED RESEARCH SHEDS SOME LIGHT (07/20/2005)

Insurance fraud is not a highly visible crime. Yet, it costs the nation billions of dollars every year. While many people view it as a white-collar crime, insurance fraud is far more pervasive. A series of focus groups in May and June and a survey conducted late last year by Polk-Lepson Research Group probed what motivates * and what deters * insurance fraud.
The research, commissioned by the Pennsylvania Insurance Fraud Prevention Authority (IFPA), identified four population segments likely to justify committing insurance fraud:
-Persons motivated by "monetary necessity."
-People who consider themselves to be part of a larger group of "social victims."
-Individuals who feel personally victimized and who are motivated by "anger."
-A group characterized as "economic sophisticates," people who seek to obtain and maintain wealth and who view fraudulent behavior as a calculated risk.
The survey found that 58 percent of Pennsylvanians, roughly 5.4 million people, feel it would be strongly appropriate for someone to commit some form of insurance fraud under certain circumstances. Yet, while more than half of the population may be willing to rationalize insurance fraud, an even higher percentage felt that steps can be taken to discourage it.
The survey found that 90.6 percent of Pennsylvanians believe insurance fraud would be discouraged by insurance companies seeking prosecution of more cases of suspected fraud. When asked what should happen to people who commit fraud, 72.4 percent said consumers should be prosecuted for lying and purposely falsifying information.
What justifications do people offer for their willingness to consider committing insurance fraud? And what messages might effectively modify * or prevent * this behavior? The IFPA asked Polk-Lepson to dig a little deeper.
Two key populations probed
Polk-Lepson's research suggests that nearly 30 percent of the state's population share common behavioral characteristics and traits that define the four "justifier" categories. In other words, nearly a third of the population fits into one of the four justifier groups that the researchers believe are most likely to commit insurance fraud * and "justify" their behavior.
The rest of the population either fit into groups seen as likely to obey insurance laws, or they don't fit the profiles of any of the groups.
Fully 60 percent of all insurance fraud justifiers fall into the two largest justifier groups * monetary necessity and social victims. Polk-Lepson selected these two groups for closer scrutiny. A series of four focus group sessions was held in Philadelphia and Pittsburgh with people who fit the profile of one or the other of the two groups.
Monetary necessity justifiers, Polk-Lepson reported, feel that a lack of money prevents people from having a level playing field in life. Ninety-one percent of this group feels insurance companies make too much money at the consumer's expense.
They tend to limit their key influences, or sources of information and advice, to family members and close friends, tend not to identify with anyone they would consider a hero, and, because they identify so closely with people similar to them in personality, aren't particularly worried about how friends or co-workers would react to them if they were convicted of insurance fraud.
Social victim justifiers, the researchers said, feel that some people have an advantage in life because of their contacts with important people or access to information. They believe the playing field is not level because of who you are and who you know. This group also feels insurance companies make too much money (73.9 percent), but is also more likely to justify insurance fraud "because everyone in society does it."
Key influences for this group include older, wiser individuals, family and religious leaders. Like the first group, social victims feel that, if they were convicted of insurance fraud, their friends and co-workers would be understanding.
What messages are effective?
Polk-Lepson found that both groups react most strongly to a fear of harming one's children. The embarrassment a criminal conviction might bring upon their children and how that would affect the parent-child relationship would most greatly influence both groups as to whether or not they would commit fraud.
Both groups regard the threat of going to jail as a strong deterrent message. Social victims, in particular, believe that being caught committing insurance fraud will result in being found guilty, going to jail, or paying a substantial fine, the researchers said. Monetary necessity justifiers believe insurance companies, sooner or later, will become more aggressive in "making examples of people."
Polk-Lepson concluded that a combination of two messages would prove powerful: fear of harming one's children and going to jail. "Participants universally agree," their focus group report said, "that, in order to act as a deterrent to committing insurance fraud, the message must be dramatic*a softer subtle approach would not be effective."
The IFPA is working with its media/public relations partner, Neiman Group, to launch a new public awareness campaign this fall and next spring.
The Cost of Insurance Fraud
-More than one-third of people hurt in auto accidents exaggerate their injuries. This adds $13-$18 billion to America's annual insurance bill. (Rand Institute for Civil Justice)
-Fraudulent property/casualty insurance claims cost insurers about $30 billion annually. (Insurance Information Institute)
-Healthcare fraud alone costs Americans $54 billion a year. (Coalition Against Insurance Fraud)
-Workers' compensation fraud costs the insurance industry $5 billion each year. (National Insurance Crime Bureau)